In this weekend’s Wall Street Journal, Fred Smith, the founder and CEO of FedEx argues that our tax and regulatory structure is out of wack:
"The United States has a completely uncompetitive tax structure in general and it has a particularly onerous tax structure for firms that are asset-intensive. If you run an industrial company like FedEx, which employs 290,000 folks, most of whom are blue-collar people, the way we have to run this business is to equip those workers with billions of dollars of assets that allow them to pick up and deliver millions of things around the world."
His theory is that the tax bias against capital explains why so much top U.S. talent got whisked off to become investment bankers. "Not too many young people coming out of school are studying to be production managers at General Motors." He says that most of FedEx’s first line managers come not from the top flight universities, but out of community colleges and the military. "The top talent has wanted to go to Wall Street." . . .
He uses an example from FedEx. "Look, our capital budget as we went into this year was about $3 billion. We went out to Boeing in July for our board meeting to see the new triple seven, [the Boeing 777] which we have bought. If we had a lower corporate tax rate with the ability to expense capital expenditures, guess what? We’d buy more triple sevens. We absolutely have to cut the corporate tax. Our current tax rate is about 38%. Even Germany has a 25% rate."
Smith’s point furthers the point I tried to make a
a little while ago: Banking and finance might need more regulation, but industry probably could use less.